7 Smart Moves to Make With Your Tax Refund

Tax season is among us. If you get a tax refund, it can be easy to think of all the cool things you’ll be able to pay for like fancy dinners, a new T.V., Rachael Ray pots, who knows.

Receiving a lump sum or money can feel good, I know, but it’s important to resist lifestyle inflation and use that money to improve your situation.

Here are seven smart moves you can make with your tax refund to help improve your life and get ahead financially.

1. Pay Off Debt

Of course, this is my favorite use for a tax refund. It’s hard to stay motivated during debt payoff so when a chunk of money comes along like your tax refund, you can make put a serious dent in one of your balances.

Technically, I’m supposed to still have a car loan since I financed my car in 2014 with a 5-year loan. Instead of spending $233 each month on a car that was depreciating in value each month and paying a crap ton of interest, I decided to use my tax refund to decrease my loan balance and make extra payments to pay my car off three years early.

Now, I am loving the ‘no car loan’ life and the fact that I can keep more of my money. If you are planning to pay off some debt with your tax refund, I’d recommend that you make your payment as soon as your tax refund hits your account so you don’t accidentally use it for something else.

2. Build Up Your Savings

Having a fully funded emergency fund is so important. If your car breaks down, you lose your job or get sick, your savings can be a life saver. It’s important to have at least 3 months of expenses stashed away so if you don’t, using your tax refund to boost your savings is a great strategy.

I use CapitalOne 360to house my emergency fund. It’s a high-yield online savings account that allows my money to earn interest each month while it’s sitting there waiting for the next unexpected expense.

3. Use It As a Down Payment on a Home

If you’re planning on buying a house, you may have to come up with a big down payment depending on the market in your area. Your tax refund can help ease that financial burden or even jumpstart your house down payment fund and motivate you to deposit more each month.

When you buy a house, it’s best to put at least 20% down in order to avoid private mortgage insurance (PMI) which can add up each year.

If you’ve been meaning to refinance your home, you can also use your tax refund to help cover the costs of the process. Refinance mortgage rates are low right now making it a great option if you’re looking to save money on your existing mortgage with a lower interest rate.

4. Invest It

Ahh investing. Did you know that YOU can become a millionaire on an average salary as long as you start investing early and strategically? Don’t believe me? Plenty of people have down it (see examples below):

When it comes to investing, there’s really nothing better to do if you want to build wealth and retire some day. I know retirement may seem like it’s far away, but the key with investing is to use all the time you have to let compound interest work and grow your money.

You’ll never be younger than you are today, so I’d advise you to start investing what you can now. Your future self will thank you.

If you’re interested in getting started with investing and building wealth, this post will definitely help you out. →

5. Home Repairs

Home repairs can be expensive and add up quickly. But upgrades and repairs can make your home a more comfortable place to live and even increase its value.

If you’ve been meaning to renovate your home or repair something that has been on your to-do list for a while, your tax refund can help so you don’t have to use your credit card or take out a loan.

6. Treat Yo’Self to a Relaxing Vacation

There’s nothing wrong with doing something special for yourself every now and then. Going on a vacation doesn’t have to cost an arm and a leg but for some people, there’s often not enough time or money to go on vacation.

If you’ve already established your emergency fund and paid off some of your debt, using some of your tax refund to fund a little getaway wouldn’t be a horrible idea.

Vacationing is great for your mental health and can make you feel refreshed and ready to tackle the rest of your goals upon your return. To save money on travel, you can go on a weekend trip or stick to a domestic location.

7. Invest in Yourself

Investing doesn’t always have to relate to the stock market. You should always prioritize investing in yourself first because it can pay off big time. There might be a course or training program you’d like to sign up for if you’re looking to learn a new skill.

You may need new equipment or tools for your job or side hustle which would put your tax refund to good use. Whatever your goals are, be sure to invest in yourself from time to time so you can take your progress to the next level and become successful.

There are a number of smart ways to use your tax refund if you usually receive one this year.

At the end of the day, you just need to focus on using it to improve certain aspects of your life as opposed to blowing it on materials things you won’t even remember next year.

However, you shouldn’t get into the habit of spending the money before you receive it (since it could vary) and you should always focus on using the income you already have to boost your finances.

Establish a realistic budget, automate your savings, pay off debt, and commit to spending less than you earn. That way, your tax refund will just be considered extra and not a necessity to get by.

Will you be getting a tax refund this year? If so, how so you plan to use it?

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Reader Interactions

Comments

Great ideas! We are using our tax returns to build up our emergency fund. I love setting that money aside because now our emergency fund is pretty set for the year, and I can stop adding money to it in the meantime.

Yep! Love all these ideas. Unfortunately, some of our tax refund will be going to moving to a new apartment. However, the rest is going to my husband’s truck loan and its exorbitant interest rate. Can’t wait to pay it off and start putting that money elsewhere!

Here’s another good thought also for affiliate marketers, bloggers, and side hustlers:

When you get your tax refund, instead of spending and splurging at the Tanger outlets, save some of it for experimenting (if you haven’t already done so) and dabbling with PPC advertising of your affiliate links from your blog or website. In other words, take an affiliate link and cloak it inside one of your sub-domain names. Be mindful to read the advertiser’s terms and conditions about that before doing so to make sure it’s ok with them. If it is ok with them, clock your affiliate link inside a sub-domain name, run an ad on Microsoft Bind PPC ad network or Google AdWords under that sub-domain, write an enticing call to action ad, and see how much of that tax refund money you just shelled out for PPC ads will flip into affiliate revenue for you.

If things work out well, keep running the ads from the affiliate money you’re getting and in due time, you just might be an affiliate marketing millionaire. 🙂

I’m a big on the idea of using windfalls and lump-sum payments to generate even more income. Sure, it’s nice to receive an unexpected big fat check, but it’s even better to turn that into a bigger payday.

I used all of my refund on paying off my last credit card and threw what was left over towards my car loan. You’ve definitely got to be strategic when you get large amounts of cash! I’m loving the extra money I have to myself each month.

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I am a Certified Financial Education Instructor, but the content on this site is not professional advice. I speak from my own personal views and opinions. I may be compensated by a third party company either through advertisements, affiliate links, or reviews found on this site or in my email newsletter but I never recommend products or resources I don't believe in. Read more here.